1. R ISK A NALYSIS & M ANAGEMENT

2. Risk – possibility that an undesirable event (called the risk event) could happen – Involve uncertainty and loss – Events that are bound to happen are not risks – Unique to current project?

3. Risk Identification Project risks – Affect project plan Technical risks – Affect quality Business risks – Affect viability of the product

5. Risk Estimation Risk probability – Occurrence of a risk Risk impact – Cost of risk Existing (known) risks

6. Risk exposure Expected value of the risk event – Calculated by multiplying the risk probability with the cost of the risk event.

7. Risk decision tree A technique that is used to visualize the risks of alternatives available. – The top level branch splits based on alternates available – The next split is based on the probabilities of events happening – Each leaf node has the risk exposure for that event – The sum of the risk exposures for all leafs under the top level split gives the total exposure for that choice.

9. Risk Mitigation Process of proactive strategy of trying to find ways to either decrease the probability of risk or its impact

11. Risk Management plan

12. Example 1 Consider a project that has 0.5% probability of an undetected fault that would cost the company 100,000 in fines. Calculate the risk exposure 0.005 * 100,000 + 0.995 * 0 = 500 Consider the use of an additional review that would cost 100 but eliminate such a fault by 50%. 0.0025 * 100,100 + 0.0095 * 100 = 250.25+ 99.75 = 350

13. Example II